Nicolas Sauvage is betting on the boring parts of AI

Nicolas Sauvage posits that it typically takes about four years for the most promising investments in technology to become evident. This insight was shared during a recent event in San Francisco, co-hosted by TDK Ventures, the corporate venture arm of the Japanese electronics giant he founded in 2019. Currently, TDK Ventures manages an impressive $500 million across four different funds. One of the standout examples of Sauvage's strategy is Groq, a startup specializing in AI chips, which achieved a valuation of $6.9 billion in its latest funding round last fall. Sauvage recognized the potential of Groq early on, investing in the company back in 2020, prior to the generative AI surge that has since made infrastructure investments more apparent. Groq was established by Jonathan Ross, a key engineer behind Google’s Tensor Processing Units, and focused on inference—the complex calculations that occur whenever a model processes a request. Ross designed Groq's chip by first creating the compiler, refining the architecture to the point where every component was essential. While some may have viewed this approach as niche, Sauvage, informed by the constraints of his parent company, saw an opportunity. Unlike consumer hardware, which often hits a demand ceiling, the necessity for inference continues to grow with each new application and model. Interestingly, the explosive demand for inference seen this year was unforeseen, as AI agents began to handle multiple tasks where previously only a single query was required. Despite the unconventional partnership between TDK, a company historically associated with magnetic tape, and Groq, Sauvage persisted in his vision. He describes the establishment of TDK Ventures as unlikely, especially since he lacked traditional backing or connections in Japan. After attending two insightful lectures at Stanford—one advocating for corporate venture capital and the other outlining its common pitfalls—Sauvage took the initiative to propose his fund to TDK’s leadership, despite his lack of Japanese language skills or residence in Tokyo. His persistence paid off, leading to the creation of a fund focused on discovering the next significant technological advancements and identifying potential threats to TDK’s business. The portfolio he has curated includes technologies that have gained more traction among venture capitalists recently, such as solid-state grid transformers and alternative battery chemistries that mitigate reliance on lithium and cobalt, both of which are subject to geopolitical instability. Sauvage's strategy involves pinpointing future bottlenecks and investing in the founders addressing these challenges. Looking ahead, Sauvage is closely monitoring the development of physical AI, particularly robotics designed for specific tasks. One of his investments, Agility Robotics, specializes in moving goods within warehouses—a critical need amid workforce shortages. Similarly, ANYbotics, a Swiss company in his portfolio, develops robust robots capable of operating in hazardous environments where human workers cannot go. The focus of these robots is clear: they excel at performing one challenging task reliably. Sauvage also anticipates a shift in computing technology. While GPUs have been dominant in training AI models, he believes inference chips like Groq’s will redefine operational processes, making them faster and more efficient. He asserts that CPUs are on the verge of a revival, as they are adaptable and well-suited for the complex decision-making required in orchestration. Moreover, he highlights the advancements in China’s manufacturing capabilities, termed "vibe manufacturing"—the rapid, AI-enhanced iteration of physical product prototypes. A recent report revealed that Chinese manufacturers are accelerating their design-build-test cycles far beyond what Western supply chains can currently achieve. For Sauvage, this presents a critical signal of emerging bottlenecks that he is addressing through TDK Ventures' investments. One final challenge remains: dexterity in robotics. While AI models are advancing quickly, the physical execution still lags behind. The entities that can innovate in physical manufacturing at the speed seen in software development will gain a significant competitive edge. This is the direction in which Sauvage is steering TDK Ventures today.